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Jul 7, 2017

Buffett Finds a Big Deal in Energy: July 7, 2017: DealBook



The New York Times

Friday, July 7, 2017

Warren E. Buffett in 2014
Warren E. Buffett in 2014 Bill Pugliano/Getty Images
By Amie Tsang 
Warren E. Buffett has made a big play to expand his energy empire by offering to buy Energy Future Holdings, the bankrupt Texas power giant.
His Berkshire Hathaway Energy has agreed to pay $9 billion for Energy Future, which would give him the company’s Oncor utilities arm.
The deal, which gives Oncor an implied equity value of $11.25 billion and an enterprise value of $18 billion, is the biggest takeover bid that Mr. Buffett has announced since buying Precision Castparts for $37 billion. And it would bolster a Berkshire unit that the billionaire has praised for generating consistent returns while requiring only routine reinvestment.
The acquisition would help to open a new chapter for Energy Future, which in its previous life as TXU was the subject of the biggest leveraged buyout on record. But the 2007 deal by Kohlberg Kravis Roberts, TPG and an arm of Goldman Sachs quickly soured during the credit crisis. The debt-ridden company filed for bankruptcy protection three years ago.
Take note:
• The deal would expand the domain overseen by Gregory E. Abel, the head of Berkshire’s energy division. He is a top contender to replace Mr. Buffett as Berkshire’s chief executive.
• Mr. Buffett is no stranger to Energy Future. Berkshire bought $2 billion in Energy Future bonds, which it later sold for a $873 million loss. “That was a big mistake,” he later wrote in a letter to investors.
• The plan requires the approval of state energy regulators, who have already rejected two previous efforts to sell Oncor.
Malone Combines QVC and Home Shopping Network
The two best-known names in home shopping are coming together in a $2.1 billion deal, forged by the billionaire John C. Malone.
The merger of QVC and Home Shopping Network comes as Amazon dominates online shopping, Walmart pushes into e-commerce and a growing number of retailers struggle for survival. Against this backdrop, both QVC and HSN have seen their sales slow.
This being a deal orchestrated by Mr. Malone, whose Liberty Interactive owns QVC and is buying the 62 percent of HSN that it doesn’t already own, there are some unusual intricacies:
• After buying HSN in the all-stock deal, Liberty Interactive plans to spin off its nonretail assets, including stakes in the cable operator Charter and Liberty Broadband
• The remaining operations, including Zulily, the flash sale site that Liberty bought for $2.4 billion two years ago, will be renamed QVC Group.
The spinoff, a classic Malone maneuver, is intended to avoid corporate taxes by giving shares in QVC Group to the shareholders rather than a cash payout.
G.E., Canon and Merck Accused of Antitrust Breaches
The European Union’s antitrust watchdog has accused General Electric, Canon and Merck of breaching the bloc’s merger rules as part of a clampdown on corner-cutting in merger clearance processes, The Wall Street Journal and The Financial Times reported.
The regulator said that G.E. and Merck had failed to tell it about relevant research projects. General Electric may have misled the agency when it made a $1.65 billion acquisition of LM Wind Power, the European Union said. Merck is under scrutiny over its $17 billion deal for Sigma-Aldrich, a United States supplier of laboratory testing materials.
Canon may have violated rules by implementing its $5.9 billion deal for Toshiba’s medical systems unit before registering the acquisition with the European regulator, the agency said.
The clearances for the deals remain valid, but if the regulator finds that the companies provided incorrect or misleading information, they could be fined up to 1 percent of their global revenue. In Canon’s case, it could be fined as much as 10 percent.
Spotted Last Night …
Several top bankers donned their tuxedos or gowns on Thursday night and headed to the Tower of London for Euromoney’s annual Awards for Excellence.
On hand amid the champagne, brass band and wonky financing humor:
• Stuart Gulliver of HSBC, picking up the award for “world’s best bank.”
• Colm Kelleher of Morgan Stanley, accepting the award for “world’s best investment bank” (after appearing in a Euromoney “Game of Thrones” cover).
• Jean Pierre Mustier of UniCredit, being honored as “banker of the year” for turning around the Italian lender.
Other notables included Dirk Lievens of Goldman Sachs (“world’s best bank for financial institutions”) and Michele LaMarche of Lazard (“world’s best bank for public-sector clients”). And congrats to Goldman’s John Brennan for winning a tenner at the end of the evening (long story). Michael J. de la Merced